Cargill Explores Options for $1 Billion Malt Business

(Bloomberg) -- Cargill Inc., one of the world’s biggest agricultural trading houses, is exploring options for its malt unit in a deal that could value the business at more than $1 billion, people with knowledge of the matter said.

The Minneapolis-based company is studying possibilities including a potential divestment of part or all of its malting operations globally, according to the people. A formal sale process could start as soon as the next few months, the people said, asking not to be identified because the information is private.

Any sale would add to the $21.7 billion of agricultural deals announced this year, data compiled by Bloomberg show. Cargill has malting operations in 10 countries including Canada, the U.S., Argentina, Australia, Germany, Belgium and France, according to its website.

The business supplies products to brewers under its Cargill Malt, Prairie Malt and Joe White Maltings brands. Cargill could decide to split the business and sell off parts to different buyers, according to the people. Deliberations are at an early stage, and there’s no certainty they will lead to any transaction, the people said.

“We believe in the long term success of the malting industry,” Cargill said in an emailed statement. “At any one time our malting business is assessing initiatives--including potential partnerships with other companies--to further progress our business strategy.”

Malting companies have come under pressure in recent years as the global beer market consolidated, with mega mergers concentrating power in the hands of a few companies. While a part of brewers’ malting requirements comes from their own operations, about two thirds are bought from external maltsters, according to Rabobank International Ltd.

As brewers become more consolidated, malting companies have fewer clients to choose from, said Francois Sonneville, a senior beverages analyst at the bank in London. “On the one hand, it’s important for maltsters to have a certain size, on the other hand it’s also important to have a certain location. So we have seen some maltsters move to other parts of the world to follow their clients as brewers have become more international."

--With assistance from Alfred Cang.

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